Final answer:
If the investment's NPV is $8,510, it means that its present value of cash flows is greater than the required initial investment, indicating a profitable opportunity.
Step-by-step explanation:
When evaluating whether to proceed with an investment, the Net Present Value (NPV) is a crucial measure. If an investment's NPV is positive, as it is in this scenario at $8,510, it signifies that the investment's returns exceed its costs.
This is because NPV compares the value of money today to the value of that money in the future, taking inflation and returns into account. A positive NPV indicates that the present value of cash flows from the investment is greater than the required initial investment.
Therefore, the correct answer is: B. the present value of the cash flows is greater than the required investment. It's not about the rate of return being less than the cost of capital or the cost of capital being higher than the internal rate of return.
It's also incorrect to suggest that the present value of cash flows is $8,510 less than the investment because that's not what a positive NPV implies.